6.2.2
Analysing Human Resource Performance 2
Labour Productivity
Labour Productivity
Labour productivity is a measure of the units produced by an employee in a given period of time. HR managers use this as a measure of an employee’s performance during appraisal reviews to inform decisions about employee pay and any possible training requirements.
Calculating labour productivity
Calculating labour productivity
- Labour productivity is expressed as a number of units. It is calculated using the following formula:
- Labour productivity = Total output ÷ Total number of employees
Example of calculating labour productivity
Example of calculating labour productivity
- If a business has 1,000 employees, and during a one month period, produces 250,000 bottles of orange juice, the labour productivity can be calculated by dividing 250,000 units by 1,000 employees to give 250 units per employee.
- A Human Resources manager could compare a labour productivity calculation with previous years to assess how productive the current workforce is. HR managers may reward employees if productivity is increasing, though may plan training for employees if productivity is decreasing.
Employee Costs as a Percentage of Turnover
Employee Costs as a Percentage of Turnover
For many businesses, employees are the biggest cost of the business. In all businesses, and especially in labour-intensive businesses, HR managers must understand how the level of spending on employees compares to the overall size of the business.
Calculating employee costs
Calculating employee costs
- Calculating employee costs as a percentage of turnover allows HR managers to assess, as a proportion of total revenue, or turnover, the amount that is spent on staffing costs.
- Employee costs as a percentage of turnover are expressed as a percentage and are calculated using the following formula:
- Employee costs as a percentage of turnover = (Total employee costs ÷ Total revenue) × 100
Example of calculating employee costs
Example of calculating employee costs
- If a newsagent had staffing costs of £105,000 in 2017, and had total revenue of £1,100,000, employee costs as a percentage of turnover could be calculated by dividing £105,000 by £1,100,000, to get 0.095, multiplied by 100 gives 9.55%. This means that the business spends 9.55% of its total revenue on employee costs.
Employee costs as a percentage of turnover
Employee costs as a percentage of turnover
- A Human Resources manager could compare their employee costs as a percentage of turnover with data from previous years, with data from competitors, if it is available, or with data from the industry.
- If employee costs as a percentage of turnover are higher than they have been in previous years, a Human Resources manager may decide to try and reduce their total employee costs.
Lower employee costs as a percentage of turnover
Lower employee costs as a percentage of turnover
- Some businesses, for example, Aldi, have much lower employee costs as a percentage of turnover, because they place emphasis on cutting costs by operating minimum numbers of checkouts and limited numbers of shop floor staff, compared with supermarkets such as Sainsbury’s and Marks and Spencer.
1What is Business?
1.1Understanding the Nature of Business
1.2Understanding Different Business Forms
1.3External Environments
2Managers, Leadership & Decision Making
2.1Understanding Management
2.2Understanding Management Decision Making
2.3Understanding Stakeholders
3Decision Making to Improve Marketing Performance
3.1Decision Making to Improve Marketing Performance
3.2Understanding Markets & Customers
3.3Market Segmentation, Targeting & Positioning
3.4Marketing Mix
3.4.1Marketing Mix
3.4.2Product Decisions
3.4.3Pricing Decisions & Price Skimming
3.4.4Pricing Decisions & Price Penetration
3.4.5A-A* (AO3/4) - Pricing & Competition
3.4.6Promotional Decisions
3.4.7Promotional Decisions 2
3.4.8Promotional Decisions 3
3.4.9Distribution Decisions
3.4.10Distribution Decisions 2
3.4.11Digital Marketing
3.4.12Evaluating Digital Marketing
3.4.13A-A* (AO3/4) - The Marketing Mix & Promotion
4Decision Making to Improve Operational Performance
4.1Setting Operational Objectives
4.2Analysing Operational Performance
4.3Increasing Efficiency & Productivity
4.4Improving Quality
4.5Managing Inventory & Supply Chains
5Decision Making to Improve Financial Performance
5.1Financial Objectives
5.2Analysing Financial Performance
5.3Sources of Finance
5.4Improving Cash Flow & Profit
6Improving Human Resource Performance
6.1Human Resource Objectives
6.2Analysing Human Resource Performance
6.3Improving Organisational Design
6.4Improving Motivation & Engagement
6.5Improving Employer-Employee Relations
7Analysing the Strategic Position of a Business
7.1Mission, Corporate Objectives, Strategy
7.2Financial Ratio Analysis
7.3Overall Performance
7.4Political & Legal Change
7.5Economic Change
7.6Social & Technological Environment
7.7Competitive Environment
7.8Investment Appraisal
8Choosing Strategic Direction
8.1Choosing Areas of Competition
8.2Choosing How to Compete
9How to Pursue Strategies
9.1Change in Scale
9.2Assessing Innovation
9.3Assessing Internationalisation
9.4Digital Technology
10Managing Strategic Change
10.1Managing Change
10.2Managing Organisational Culture
10.3Managing Strategic Implementation
10.4Problems with Strategy
Jump to other topics
1What is Business?
1.1Understanding the Nature of Business
1.2Understanding Different Business Forms
1.3External Environments
2Managers, Leadership & Decision Making
2.1Understanding Management
2.2Understanding Management Decision Making
2.3Understanding Stakeholders
3Decision Making to Improve Marketing Performance
3.1Decision Making to Improve Marketing Performance
3.2Understanding Markets & Customers
3.3Market Segmentation, Targeting & Positioning
3.4Marketing Mix
3.4.1Marketing Mix
3.4.2Product Decisions
3.4.3Pricing Decisions & Price Skimming
3.4.4Pricing Decisions & Price Penetration
3.4.5A-A* (AO3/4) - Pricing & Competition
3.4.6Promotional Decisions
3.4.7Promotional Decisions 2
3.4.8Promotional Decisions 3
3.4.9Distribution Decisions
3.4.10Distribution Decisions 2
3.4.11Digital Marketing
3.4.12Evaluating Digital Marketing
3.4.13A-A* (AO3/4) - The Marketing Mix & Promotion
4Decision Making to Improve Operational Performance
4.1Setting Operational Objectives
4.2Analysing Operational Performance
4.3Increasing Efficiency & Productivity
4.4Improving Quality
4.5Managing Inventory & Supply Chains
5Decision Making to Improve Financial Performance
5.1Financial Objectives
5.2Analysing Financial Performance
5.3Sources of Finance
5.4Improving Cash Flow & Profit
6Improving Human Resource Performance
6.1Human Resource Objectives
6.2Analysing Human Resource Performance
6.3Improving Organisational Design
6.4Improving Motivation & Engagement
6.5Improving Employer-Employee Relations
7Analysing the Strategic Position of a Business
7.1Mission, Corporate Objectives, Strategy
7.2Financial Ratio Analysis
7.3Overall Performance
7.4Political & Legal Change
7.5Economic Change
7.6Social & Technological Environment
7.7Competitive Environment
7.8Investment Appraisal
8Choosing Strategic Direction
8.1Choosing Areas of Competition
8.2Choosing How to Compete
9How to Pursue Strategies
9.1Change in Scale
9.2Assessing Innovation
9.3Assessing Internationalisation
9.4Digital Technology
10Managing Strategic Change
10.1Managing Change
10.2Managing Organisational Culture
10.3Managing Strategic Implementation
10.4Problems with Strategy
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